Campaign Vows Meet Reality in Newark

By ANDREW JACOBS

Published: September 11, 2006

Shortly before leaving City Hall after two decades in office, Mayor Sharpe James merrily announced a $30 million surplus last spring, promising residents of this struggling city a 5 percent cut in property taxes. Two months later, state auditors declared the black ink a mirage, leaving Mr. James's successor, Cory A. Booker, with what turned out to be a $44 million hole.

''It's really a cruel joke,'' Mr. Booker said recently in an interview. ''You win an election, come into office and you're left to clean up the previous administration's mess.''

So as Mr. Booker ends his third month as mayor, his grand dreams for a safer, cleaner and more prosperous Newark are colliding with the reality of the city's troubled finances. Having won the election on a platform of fine promises, Mr. Booker is instead being forced to reduce services and raise taxes. In the $697 million budget he presented late last month for the current fiscal year, which ends on Dec. 31, the mayor proposed an 8.3 percent rise in property taxes, an average of $322 for every homeowner.

''We're three-fourths through the year, so there's no way to make smart cuts for 2006,'' explained Bo Kemp, the city's business administrator. Sitting in his City Hall office as water dripped from the ceiling into a trash can, Mr. Kemp said that the administration expected to introduce the 2007 budget -- one the administration has vowed will have no tax increases -- toward the end of the year. ''That's when the real cuts begin,'' he said.

Mr. Booker, a former member of the Municipal Council -- which must approve the mayor's budgets -- said that he knew the city's finances were less than stellar, but Mr. James's talk of a surplus made him think he would have more of a cushion.

Instead, the state Department of Community Affairs, which reviews and approves municipal budgets, ruled that the James administration's accounting was full of inconsistencies and questionable math. In early July, a few days after Mr. Booker celebrated his inauguration, the state ordered the city to scrap the 2006 budget and start again.

To state officials, the most worrisome figure was $80 million that Mr. James had slated for a pair of private organizations he would have controlled after leaving office. Gov. Jon S. Corzine was so alarmed that he summoned Mr. James and the then-council members to Trenton for a public reprimand that was recorded by television news cameras. The state ordered the city to rescind the appropriations to the groups.

Mr. James, who declined to run for a sixth term, did not return calls made to his home and his office at Essex County College, where he is a professor.

City Hall's new occupants say they have had a hard time figuring out exactly how the city balanced its books all these years.

In recent weeks, employees have discovered unpaid invoices from as far back as 2001, unsent water bills and welfare recipients who turned out to be dead. Dan O'Flaherty, the city's acting finance director, said the previous administration had more than 4,000 employees and millions of dollars in outside contracts but only one internal auditor. Mr. Booker has added four auditors and hired a small army of forensic accountants.

''We're still learning every day what perils lie around the corner,'' said Mr. O'Flaherty, an economics professor at Columbia University who has been studying the city's finances for three decades. ''For the longest time, the city was paddling down a river, approaching a waterfall and paddling faster and faster in that direction.''

Mr. Booker has characterized some of his predecessor's actions as gluttonous, or worse.

In the waning days of his administration, Mr. James and a score of his employees took more than $650,000 in compensation for unused vacation and sick time, according to council records. Shortly before he left office, the mayor and council -- all but two of whom were voted out -- handed out millions of dollars to people whom Mr. Booker describes as their friends and political allies. And two weeks ago, federal and state authorities began investigating at least $80,000 in purchases that the former mayor charged to municipal credit cards for trips to Brazil, Martha's Vineyard and Puerto Rico.

Asked about the travel expenses during a public event last week, Mr. James defended the trips -- along with city-funded meals and concerts closer to home -- as mayoral expenses.

In the meantime, Mr. Booker and his staff have been left to explain to a wary public how a putative surplus turned into a yawning deficit.

The main culprit, the new mayor contends, is the previous administration's use of $400 million bestowed upon it four years ago by the Port Authority of New York and New Jersey, the agency that operates Newark Liberty International Airport. Nearly half that money, which resulted from a settlement between the city and the agency, has gone toward the construction of the hockey arena that is rising next to City Hall. But the rest -- $40 million to $60 million each year -- has been used to pay for an ever-expanding budget.